Since its first appearance in 2009, Bitcoin has grown steadily to become the top cryptocurrency in the world. It has reached a level where it is challenging fiat currencies in the financial markets. Bitcoin trading can be a profitable venture; though it has significant risks that a trader needs to analyze before starting to trade.
Is trading bitcoin profitable?
Any smart investor knows that the financial market can be a profitable investment point. Investing in Bitcoin has had various successes in the financial markets. A simple explanation that could explain this is following its price movements. In 2011, the price of Bitcoin was at $1. Fast forward to 2021, Bitcoin’s value is at over $48,000.
However, the price movement of Bitcoin has not been that simple; there are instances where the price of Bitcoin collapsed and investors lost a lot of money. This financial instrument behaves just like any other, it can be a profitable or a risky investment.
Bitcoin strategies that you should use
Given the volatility of Bitcoin, investors must be critical when determining the right trading strategy. Here are some proven strategies that can help both beginners and experienced traders.
Start out small
If you are starting to trade, you shouldn’t put a big stake in this investment. The best strategy is to start small. It is hard to determine the right amount to start with because of the different financial power that investors have. You should know that Bitcoin’s price can move more than traditional currencies. This kind of instability can result in losses.
Without specifying the amount to start your investment, a keen trader should risk money that will not hurt their financial investment portfolio. Growth can be progressive when investing in the digital markets.
Stick to your trading strategy
One trading mistake that investors make is changing their trading strategy repeatedly. Largely, these strategies fall into four categories i.e.
- Scalping – for traders who make multiple trades per day. They gain small profits.
- Day traders – ideal for traders who enter the market and leave within 24 hours, taking advantage of short-term movements.
- Swing trading – a type of trading where traders analyze the market to understand the trend and use them to enter and exit trading positions.
- Passive trading – holding to a position to take advantage of long-term price movements.
Once a trader has interrogated these strategies, they must stick to one to succeed.
Use leverage carefully
An important strategy that can help to minimize losses is using leverage carefully. Traders who use high leverage risk losing their investment at once in as much as there are also good profit prospects.
Use stop-loss orders
Finally, any trading position should be protected with a stop-loss order. This helps to reduce the amount of Bitcoin that can be lost while trading. For locking in profits, traders can also use profit targets. Strictness is the key to success.
Is Bitcoin safe when using these strategies?
These strategies reduce the risk of losses and maximize profit potential. You should note that these strategies are not a guarantee of making profits when investing in Bitcoin. But you should use them as your first line of defense to cushion yourself from unwanted losses.